The bankrupt SCO Group is planning to hold an open auction of its OpenServer product line and mobile business in an effort to separate its controversial intellectual property litigation from its product business, the Lindon company announced in a Chapter 11 reorganization plan filed Thursday.
The plan is the second one filed after New York private equity firm Stephen Norris Capital Partners and a group of Middle Eastern investors last year backed off their initial $100 million offer to fund SCO's comeback. York Capital Management, another New York private equity firm, also failed in its efforts to buy the company.
In a letter issued today to shareholders and customers, the 66-worker company said it has been working over the past nine months with several investment groups to sell its assets, but the deepening financial crisis and tightening credit markets have made it "difficult to secure a plan sponsor prior to the restructuring plan filing deadlines."
But SCO CEO Darl McBride said in the letter that several groups have expressed interest in buying SCO's assets via a public auction.
"We believe that this approach will maximize customer and shareholder value and expedite the investor process," McBride said. "One of the goals we pursued during bankruptcy has been to seek outside investment to assist in paying off creditors, satisfying shareholders and establishing a well-capitalized business with sufficient funds to move the business aggressively forward."
The company hopes to secure bids of at least $6 million for both the OpenServer product and mobile business, according to court documents filed in U.S. Bankruptcy Court today. OpenServer accounts for two-thirds of SCO's Unix revenues and has thousands of customers including small- to mid-sized businesses and large companies such as McDonald's.
"The investment groups understand the value of these assets. They would invest in these businesses to advance the products, capitalize the business with additional monies and continue to keep the employees," said Jeff Hunsaker, president and chief operating officer for SCO Operations, SCO's products division. "It's difficult to manage a products business when you have a lawsuit that casts a shadow over the business. This will allow the business to move forward unencumbered by the litigation."
If and once the two assets are sold, SCO will focus entirely on its ongoing litigation over the disputed Unix code with IBM, Novell and others, which is now stayed because of SCO's bankruptcy filing, he said.
But the company says it has a Plan B if the auction of SCO's assets isn't successful.
If the auction fails, then the company may reduce its operating expenses by cutting the base salaries paid to its senior management, including McBride, by 10 percent.
"If the bids aren't where we think they should be, then SCO will remain a standalone business and continue to sell and support its Unix and mobile products and services including UnixWare, OpenServer, SCO Mobile Serve and other mobile applications," Hunsaker said.
These products include the SCO Cloud Server, its next-generation Web 3.0 platform, which can serve up personal and business applications such as FCmobilelife by FranklinCovey running on any Web browser, Java, Windows Mobile or iPhone devices. FCmobilelife by FranklinCovey is a mobile phone application that uses SCO's server technology to schedule task management and download and upload video and audio clips, Hunsaker said.
The company will also consider increasing pricing on some products and release new products, such as the SCO Unix Virtual platform, which allows Unix applications to run on the latest servers from IBM, Dell or Hewlett-Packard.
A court hearing on the new bankruptcy plan will be held on Feb. 18. Hunsaker estimates the auction may be held sometime between March and May, depending on when the new Chapter 11 plan is approved.
Posted in Business on Thursday, January 8, 2009 11:00 pm
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